Correlation Between River and Advance Auto
Can any of the company-specific risk be diversified away by investing in both River and Advance Auto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining River and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Advance Auto Parts, you can compare the effects of market volatilities on River and Advance Auto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in River with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Advance Auto.
Diversification Opportunities for River and Advance Auto
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between River and Advance is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and River is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on River and Mercantile are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of River i.e., River and Advance Auto go up and down completely randomly.
Pair Corralation between River and Advance Auto
Assuming the 90 days trading horizon River and Mercantile is expected to generate 0.05 times more return on investment than Advance Auto. However, River and Mercantile is 21.65 times less risky than Advance Auto. It trades about 0.0 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.25 per unit of risk. If you would invest 17,550 in River and Mercantile on November 28, 2024 and sell it today you would earn a total of 0.00 from holding River and Mercantile or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
River and Mercantile vs. Advance Auto Parts
Performance |
| Timeline |
| River and Mercantile |
| Advance Auto Parts |
River and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Advance Auto
The main advantage of trading using opposite River and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River position performs unexpectedly, Advance Auto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Advance Auto will offset losses from the drop in Advance Auto's long position.| River vs. Fevertree Drinks Plc | River vs. St Galler Kantonalbank | River vs. Berner Kantonalbank AG | River vs. Bell Food Group |
| Advance Auto vs. Pets at Home | Advance Auto vs. Indutrade AB | Advance Auto vs. Cairn Homes PLC | Advance Auto vs. DFS Furniture PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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